A limited constitutional government calls for a rules-based, freemarket monetary system, not the topsy-turvy fiat dollar that now exists under central banking. This issue of the Cato Journal examines the case for alternatives to central banking and the reforms needed to move toward free-market money.

The more widespread use of body cameras will make it easier for the American public to better understand how police officers do their jobs and under what circumstances they feel that it is necessary to resort to deadly force.

Americans are finally enjoying an improving economy after years of recession and slow growth. The unemployment rate is dropping, the economy is expanding, and public confidence is rising. Surely our economic crisis is behind us. Or is it? In Going for Broke: Deficits, Debt, and the Entitlement Crisis, Cato scholar Michael D. Tanner examines the growing national debt and its dire implications for our future and explains why a looming financial meltdown may be far worse than anyone expects.

The Cato Institute has released its 2014 Annual Report, which documents a dynamic year of growth and productivity. “Libertarianism is not just a framework for utopia,” Cato’s David Boaz writes in his book, The Libertarian Mind. “It is the indispensable framework for the future.” And as the new report demonstrates, the Cato Institute, thanks largely to the generosity of our Sponsors, is leading the charge to apply this framework across the policy spectrum.

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Archives: 08/2012

Joelle Cannon is one of Capitol Hill’s top budget experts, and she looks great in her new Downsizing Government T-shirt. She’s good at cutting costs and knows a bargain when she sees it. The new shirts are just $18 from the Cato store and emblazoned with the inspiring slogan “Small is beautiful … when it comes to government.”

Joelle works full-time battling the bloated federal budget for Senator Tom Coburn. You can help her fight overspending by ordering a T-shirt and spreading the downsizing message to your friends and family.

And there is more from the Cato store. You can impress your office mates with a handsome Downsizing Government coffee mug. The mug will help banish the usual banal banter at the coffee machine, and hopefully spark conversation on the proper role of government in society.

The mugs are a robust 16 oz and can be yours for just $7.50. Just think—every time you reached for your caffeine fix, you’d be declaring your independence from the philosophy of big government!

US medal-winning athletes at the Olympics have to pay tax on their prize money - something which is proving controversial in the US. But why are athletes from the US taxed when others are not? The US is right up there in the medals table, and has produced some of the finest displays in the Olympics so far. … But not everyone is happy to hear that their Olympic medal-winning athletes are being taxed on their medal prize money. Athletes are effectively being punished for their success, argues Florida Senator Marco Rubio, a Republican, who introduced a bill earlier this week that would eliminate tax on Olympic medals and prize money. …This, he said, is an example of the “madness” of the US tax system, which he called a “complicated and burdensome mess”.

It’s important to understand, though, that this isn’t a feel-good effort to create a special tax break. Instead, Senator Rubio is seeking to take a small step in the direction of better tax policy.

More specifically, he wants to move away from the current system of “worldwide” taxation and instead shift to “territorial” taxation, which is simply the common-sense notion of sovereignty applied to taxation. If income is earned inside a nation’s borders, that nation gets to decided how and when it is taxed.

In other words, if U.S. athletes earn income competing in the United Kingdom, it’s a matter for inland revenue, not the IRS.

Incidentally, both the flat tax and national sales tax are based on territorial taxation, and most other countries actually are ahead of the United States and use this approach. The BBC report has further details.

The Olympic example highlights what they regard as the underlying problem of the US’ so-called “worldwide” tax model. Under this system, earnings made by a US citizen abroad are liable for both local tax and US tax. Most countries in the world have a “territorial” system of tax and apply that tax just once - in the country where it is earned. With the Olympics taking place in London, the UK would, in theory, be entitled to claim tax on prize money paid to visiting athletes. But, as is standard practice for many international sporting events, it put in place a number of tax exemptions for competitors in the Olympics - including on any prize money. That means that only athletes from countries with a worldwide tax system on individual income are liable for tax on their medals. And there are only a handful of them in the world, says Daniel Mitchell, an expert on tax reform at the Cato Institute, a libertarian think tank - citing the Philippines and Eritrea as other examples. But with tax codes so notoriously complicated, unravelling which countries would apply this in the context of Olympic prize money is a tricky task, he says. Mitchell is a critic of the worldwide system, saying it effectively amounts to “double taxation” and leaves the US both at a competitive disadvantage, and as a bullyboy, on the world stage. “We are the 800lb (360kg) gorilla in the world economy, and we can bully other nations into helping enforce our bad tax law.”

To close out this discussion, statists prefer worldwide taxation because it undermines tax competition. This is because, under worldwide taxation, individuals and companies have no ability to escape high taxes by shifting activity to jurisdictions with better tax policy.

Indeed, this is why politicians from high-tax nations are so fixated on trying to shut down so-called tax havens. It’s difficult to enforce bad tax policy, after all, if some nations have strong human rights policies on privacy.

For all intents and purposes, a worldwide tax regime means the government gets a permanent and global claim on your income. And without having to worry about tax competition, that “claim” will get more onerous over time.

Cato scholars aspire to high standards for accuracy and analysis. Because of that, I feel obligated to note an error in Dan Mitchell’s recent post on the ongoing failure of Washington’s economic stimulus efforts.

About $800 billion? I wish. By my calculation, federal fiscal stimulus efforts for the recent recession are now close to $2.5 trillion—at least.

Of course, Dan had in mind the $820 billion American Recovery and Reinvestment Act that President Obama pushed through Congress within a month of becoming president. But ARRA was just one of several fiscal stimulus bills that Washington adopted, beginning with the February 2008 Economic Stimulus Act and continuing through to early this year. Some of those bills were explicit stimulus measures; others were ostensibly intended to address other policy goals, but were engineered to provide fiscal stimulus by borrowing and spending money now, and then using future government revenues to pay off that borrowing (perhaps when God grants St. Augustine chastity and continence).

Below is a list I’ve kept of these stimulus measures. I use multiple-sequence numbering to differentiate between major and minor legislation.

Earlier this week I wrote about the perils of the NRA’s single-issue politics. Now it’s breastfeeding moms in the crosshairs – different issue, same principle.

In the NRA case, it seems that they’re going after a Tennessee state legislator – a long-time NRA member and supporter, no less – who opposed a bill that would have allowed employees to keep guns in their cars while parked in their private employers’ parking lots. The principle at issue there could not be simpler or more basic to a free society: individuals, including private employers, should have a right to determine the conditions on which others may enter their property. The NRA’s mistake is in asking the state to restrict that right in the name of the Second Amendment, which of course applies only against governmental, not private, restrictions.

The breastfeeding moms make a similar mistake. We learn from NPR this morning that a number of them have just gathered en masse and staged a “Great Nurse-In” at the U.S. Capitol. Their aim is to secure “federal protection of breastfeeding everywhere.” Everywhere? In my home, my business?

Don’t get me wrong: I’m no more against the right to breastfeed than I am against the right to keep and bear arms. That’s not the point. Rather, the point is that, in a free society, the property right is fundamental, starting with your property in your person and your liberty, which you can exercise only to the extent that you respect the equal rights of others. Property rights set the lines that determine where one person’s rights end and the next person’s begin, which is why getting those lines right is so crucial to a society that aspires to protecting equal rights.

The breastfeeding moms might well object if they were forced to allow people to carry guns into their businesses, just as the gun owners might object to being forced to allow breastfeeding in theirs. And it isn’t that some values are better than others. We can argue over that all day and get nowhere. With rights, by contrast, there’s a good possibility of agreement. In fact, the nation is based on a live-and-let-live principle we largely agreed on at the outset – and lived by, for the most part, until we started asking government to impose our values on others, leading to the war of all against all that we see all about us today and to the politicization of everything, including parking lots and breastfeeding.

Overall, this Tennessean article summarizes well yesterday’s House Oversight Committee hearing on the IRS rule that Jonathan Adler and I write about here and here. Unfortunately, the article does perpetuate the misleading idea that the nation’s new health care law is “missing” language to authorize tax credits in federally created Exchanges. (The statute isn’t missing anything. It language reads exactly as its authors wanted it to read.)

Excerpts:

Rep. Scott DesJarlais’ argument that the health-care reform law lacks wording needed to implement a crucial part of it took a major step forward Thursday.

The Jasper Republican got a hearing before the House Committee on Oversight and Government Reform on his claim that the Internal Revenue Service lacks authority to tax employers who fail to offer health policies and leave workers to buy coverage through federally established exchanges.

His arguments, while not uncontested during the hearing, apparently won over the committee chairman, Rep. Darrell Issa, R-Calif. Issa signed on Thursday as a co-sponsor of DesJarlais’ bill related to the issue. Other House Republican leaders also have shown interest, DesJarlais said in an interview afterward. He said he expects a vote on the House floor sometime this fall.

And a Senate version has been introduced by Sen. Ron Johnson, R-Wis…

DesJarlais contends that Congress worded the law in a way that authorizes the taxes and tax credits only for insurance bought through state-based exchanges, not federal ones…

The distinction is important because many states are balking at setting up their own exchanges. DesJarlais’ argument would mean federal exchanges couldn’t be implemented in those states, either…

“They have rewritten a law Congress haphazardly drafted,” DesJarlais said.

His bill, which has 35 cosponsors, would keep the IRS from moving forward with its regulatory language.

“I have employers watching this very closely,” DesJarlais added. Essentially, he said, the issue is “about whether ObamaCare can continue to exist.”

Indeed, we’re getting to the point where the monthly employment reports from the Labor Department must be akin to Chinese water torture for the Obama administration. Even when the unemployment rate falls, it gives critics an opportunity to recycle the chart below showing how bad the economy is doing compared to what the White House said would happen if the so-called stimulus was enacted.

But for the past few months, the joblessness rate has been rising, making the chart look even worse.

I never watch TV, so I’m not in a position to know for sure, but I haven’t seen any articles indicating that the Romney campaign is using this data in commercials to criticize Obama. That seems like a missed opportunity. But since it’s not clear to me that Romney would actually do anything different than Obama (check out this post if that seems like an odd assertion), I don’t focus on the political implications.